James Gallagher

different types of startups to join

Published on May 14, 2020

Joining a startup is a good way to break into a career in technology.

In his famous essay, Paul Graham says that startups are equal to growth. What distinguishes a startup from any other type of business -- like a hairdressing company, or a consultancy firm -- is its focus on growth. Startups grow, or they die.

This mentality means that, if you join a startup, you are naturally in a place where you need to grow. If you don’t grow with the company, you will either: (i) fall behind; or (ii) not guide the company to success, which means you will likely not work there too long.

But there are different types of startups you can join. If you’re interested in joining a startup, it’s first important to consider what type of startup you want to join.

Two people working in their basement is a startup, and so is a 500-person company that just raised a Series D. Yet these types of businesses only have two things in common: their focus on growth, and the fact they are called “startups.”

Join an early-stage company

The first type of company you can join is an early-stage company. My definition for this type of company is a business that only has a few employees, if any at all. The business may have full-time workers, or they may all be part-time.

At this stage, the company may not look completely like a business. It certainly will not have a sound business model planned out that will take it to become a billion dollar business. The company is too early -- it needs to validate and explore.

Joining this type of company is great if you love taking ownership over work. If you join a startup that is at a really early stage, you’ll have to take on a wide range of responsibilities. In fact, you may not even take on a job title, and if you do it will be something generic, like “Salesperson” (which doesn’t mean much in a four-person enterprise).

At this stage, you are taking on a lot of risk. The company could easily fail; it doesn’t have a lot of external validation yet. However, the rewards are commensurate with the risk that you take. For young people who want to join a startup, I would say this path is best for those who really want to learn about building a company from the ground-up. But it’s certainly not for everyone (including me).

Join a venture-backed company

Then there are venture-backed companies. These are companies that have been validated by at least one external party: an investor.

This is important to understand because investors do a lot of due diligence, even at early stages. For an investor to give a startup a check, they need to be confident in the team. Even if the idea isn’t great, you know that if a startup has venture backing, they must be doing something right in the eyes of an investor who has likely seen it all before. The bigger the names on the term sheet, the more a startup will have had to impress them.

Joining a venture-backed company is great if you want to make an impact. While the business may already be on a solid trajectory -- it is growing, it has some external validation -- you can jump on at an early stage and have a real impact.

This is perhaps the best point to join a startup. There is some risk involved, because the company could still fail, like any startup. However, there are still plenty of opportunities to learn.

Venture-backed companies are largely still figuring things out, and so if you want to take ownership over a project, you should be able to. For instance, the company at which I work is venture-backed. Since joining the company, I have worked on everything from technical writing to product, based on the needs of the business. I have been able to have these experiences because the business is still growing, and I have wanted to pursue as many learning opportunities as possible.

In addition, joining a company at this stage will give you a good name to drop in your future interviews. If you join a company that is venture-backed, even if it fails, you can always say that you have experience at a venture-backed startup. That gives you some sense of credibility, which will help you as you go on in your career.

Join a late-stage startup

Later-stage startups are also great places to learn. They are still startups, and so they are still hyper-focused on growth.

The problem with later-stage startups though is that they are more formal. In order to grow, you need to get more formal. YouTube’s culture today is nothing like the culture it had when it was getting started, because in order to grow, you need to adapt to the realities of business.

When startups grow, one of the changes that happens is that employees become more formal. This is good if you are looking for a job where you will learn quite a bit, and work within a certain set of responsibilities. Late-stage startups also provide opportunities for progression: if you do well, there should be another rung up the ladder to which you can advance.

However, because roles are more well-defined, the extent to which you can dip your toe into other functional areas within the business is limited. You will miss out on the experiences of being on a roller-coaster, and your time will be more focused on helping the later-stage company advance to IPO or acquisition scale.

Risk is the defining factor

One of the common themes that I have spoken about in this article is risk. The earlier the stage of the company, the more risk that you take on.

Risk, in startups, is correlated with learning. The earlier you join a company, the more of that company you will be able to see, and the more opportunities you will have to get involved.

This is why I advocate for joining a venture-backed company. They provide the best of both worlds: somewhat minimal risk, but excellent learning opportunities.

If you are able to stomach more risk, an early-stage startup is a good place to be. This is because the opportunities for learning and advancement are clear. However, for most people -- especially those just coming out of high school or college -- the risk parameters of an early-stage company do not make sense.

I would say that you don’t need to put too much thought into choosing the “right startup” for which to work. The right startup is the one at which you feel you will learn the most, and the one that you think will be best for you in the long-term. Join a startup that you think is interesting, and don’t make a decision solely based on the sage of the company.

With that in mind, understanding the stage of the company for which you are considering working gives you a clearer insight into what you can expect on a day-to-day basis. Indeed, knowing the business model behind your employer is a great way to predict what you are going to be doing on the job.